Report shows extreme inaction into tax fraud by IRS

A new report indicates that the U.S. Internal Revenue Service has not acted upon whistleblower information, thereby failing to recover the millions of dollars lost through tax fraud. The problem is one of the IRS failing to act on whistleblower tips that come through — and plenty of them have over the past seven years.

An annual report is filed by the IRS and sent to Congress, detailing the agency’s fiscal year activity. Forbes writes that this year’s report demonstrates a severe lack of adherence to the calls made by whistleblowers that could have led the IRS to recover massive amounts of money lost through tax fraud. Out of thousands of submissions, only nine awards have been made to whistleblowers since December 2006. That year marked the enactment of a law instituted by Congress to encourage general citizens to divulge information about any entities committing tax fraud that exceeds $2 million. The provision was a section included in the Tax Relief and Health Act of 2006 that detailed how whistleblowers may receive rewards of up to 30 percent of the amount collected by the IRS as a result of the information provided about tax fraud. Before the act was instituted, the IRS rarely paid out to the whistleblowers who provided information leading to successful recovery of dollars lost through tax fraud.

But despite the increase in number of cases reported to the IRS, the agency has followed up on very few. The program has not been as effective as designed because of a deeply rooted attitude within the IRS — as Forbes writes — that is fundamentally against whistleblower investigations. The source quotes Chuck Grassley, a Republican Senator from Iowa, as condemning the glacial pace of action the IRS has taken regarding the investigations into the thousands of whistleblower reports left un-investigated:

“The agency should do everything it can to make these cases a priority…My worry is that the slow progress will cause the tips to dry up. That would harm the whistleblowers who stick their necks out to flag tax cheating and the honest taxpayers who pay what they owe and deserve tax fairness.”

Of course, while taxpayers might be angered at such an oversight committed by the IRS, there is not much to do about the lack of action. The report certainly does not further encourage future whistleblowers who would decide to report tax fraud, as well.